Gold Daily and Silver Weekly Charts - Ebb and Flow - Gresham's Law

"When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation."

Gresham's Law

In case you were wondering why gold is flowing from west to east, it is Gresham's Law in action.  Nothing could be clearer.  What we have not yet seen is mispriced paper flowing back en masse into a vortex of defaults on counterparty risk.

It was 'risk on' in the markets as Russia's Putin reassured the world that he does not intend to invade the Ukraine, but will protect Russia's interests in the Crimea, a traditional base for their navy.

And so stocks soared, and gold and silver gave up some of the ground which they had taken yesterday.

So the ebb was in price, and there was no flow out of the Comex gold warehouse.

I suspect that March will be relatively quiet now, save for the stray exogenous event as we saw yesterday. The line in the sand has long been drawn on the charts, and the Anglo-American banking cartel is likely to try and hold the price about where it is now.

The wild card is the continuing physical offtake of real bullion in the Asia markets, particularly India and China.

President Obama submitted a 2015 budget today that was largely unnoticed with all the sabre rattling being done of the Congressional neo-cons.   It has an interesting infrastructure proposal, and some moves towards real tax reform by closing the massive carried interest loophole that serves the financiers and distorts capital allocation towards gimmickry. 

Given the broken state of the political landscape I sincerely doubt that anything constructive will be done.   Until the financial system is reformed, and balance is restored, there will be no sustainable recovery.   The plundering of the real economy by the moneyed interests will continue until exhaustion or collapse.

Bank of England Seeks to Suspend Derivatives Default Clause Now to Prevent Another Lehman.

I think when the time comes, when people finally wake up to the need to protect some portion of their wealth, there will be little or no physical gold or silver bullion available anywhere, at almost any price, for some period of time.

There will be a market dislocation as we saw in the credit markets when Lehman Brothers collapsed, and the pyramid of leveraged paper and cross claims came to a complete halt overnight, with no one knowing what is the real value of paper, and who owes what to whom.    It will be a cavalcade of broken promises and false representations.

And the Fed may face a daunting task in printing its way out of that one.  If it happens as I think, it will be a reckoning to remember.  It will be MF Global, writ large.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Rally Time, For Now

The markets took off higher overnight as Vladimir Putin indicated he was not interested in invading the Ukraine, but has moved to protect Russia's interest in the Crimea, which is their traditional naval base on the Black Sea.

I will not get into the response from Republicans like John McCain, since much of what they say is just partisan theater, politics as usual,  but let it suffice to say that it is a relief that the neo-cons are out of power and out of favor. One can forget how truly misguided they are.   I don't think they realize how the nation's attitude towards their discretionary wars has changed over the past thirteen years of continuous war. 

So what next. Despite the euphoria on Wall Street, the economic signs are still weak. I was reading the Fed's Mission Accomplished article by Tim Duy about those in the Fed who are urging higher interest rates now because of the 'tight labor market' and wonder to myself, 'what are they thinking?'

It is a tight labor market, if you are applying for a part time job flipping burgers or stacking shelves, but the recovery is tightly constrained to those economic sectors which have financialized the real economy, largely to the detriment of the greater public.

This is not to say that blowing a stock market bubble to cure the housing bubble that was created to offset the tech bubble is a good idea, but the Fed is celebrating The Recovery™ very prematurely, judging by the slack economic demand, continuing stagnation in real disposable income, and high economic uncertainty and insecurity enjoyed by most Americans.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Flight To Safety, Undeniable - Yellow Dog, Wagging

"When a nation threatens another nation the people of the latter forget their factionalism, their local antagonisms, their political differences, their suspicions of each other, their religious hostilities, and band together as one unit. Leaders know that, and that is why so many of them whip up wars during periods of national crisis, or when the people become discontented and angry."

Taylor Caldwell


"Every war when it comes, or before it comes, is represented not as a war but as an act of self-defense against a homicidal maniac...War against a foreign country only happens when the moneyed classes think they are going to profit from it."

George Orwell

Gold popped very hard today on what is undeniably a flight to safety out of fiat currencies and into something that is durable in a crisis with less counterparty risk. It was a clear result of the tension in the Crimea.

By the way, most Americans have little understanding of the role which the Crimea has played historically and how it is different from and more important to Russia than the Ukraine itself, which is important in its own right.

Nato has shoved its membership to the doorstep of Russia, using European as a proxy with the most to lose. And finally Russia has reacted, drawing their own line in the sand. And we are shocked, shocked that they can do something so primitive as send in the military to protect what they view as strategic interests over a territory and a people who have long standing ties.

I do not wish to defend Putin and what he is doing, as I prefer not to defend China. I view both of these former communist nations as evolving oligarchies that routinely diminish the rights of the individual and enjoy significant corruption at the top.  Copycats that they are.

Unfortunately continental Europe is providing a convenient buffer for this conflict by proxy, and we know what the Anglo-American policy thoughts on that topic have been of late, FU Europe. And that does not stand for Frank Underwood or Francis Urquhart, although it certainly matches their fictional styles towards politics depending on which version of House of Cards you may have been watching.  A house of cards indeed.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Auto Sales Light

Auto sales, specifically for light vehicles aka light trucks, came in 'light' today.

As an aside, I grew up around and worked with the US auto industry most of my life, and have some particularly strong opinions on how they have failed to execute strategically.  And after many years of product management, albeit in an unrelated field, my thoughts on using product line strategies are fairly strongly set.

The Bloomberg anchor du jour thinks that domestic car sales are light because most of the kids are moving to a few large cities, where they do not need cars, and if they do, they will share them with Bitcar.

And his counterpart chimed in that the US automakers have made cars so well that people do not need them as often. As if.   Not a shred of evidence provided. 

Yes, urban consumers tend not to own cars, but I mean, come on.  And people are hanging on to their cars for much greater lengths of time.  And car repair and maintenance costs are no joke.   Is it car and truck ownership overall that is falling dramatically, or is it something else entirely related to our being in a continuing recession, the worst which we have seen since WW II? 

Rather, I think it is more likely that in their never-ending quest for maximum short term profit, the US automakers keep moving the goalposts for the average vehicle cost higher, even while the average US consumer is experiencing a balance sheet recession, and a great reluctance to make major purchases and take on years of debt.

What is the average cost for a decently equipped light vehicle these days, $30,000 or so? And import prices are decidedly higher. At these higher prices more affluent Americans tend to buy imports, rather than Fords or Chevies. If the US automakers are smart, having finally learned a lesson about quality, they need to relearn some lessons about marketing that they have also forgotten, and selling to your target markets. And most importantly, knowing who they are.

Why, for example, Ford does not more aggressively carve out a chunk of market share for themselves by making a determined effort to force BMW, Mercedes, and Toyota into the even higher brackets of consumer, and beat them to death with lower cost with quality and more basic vehicles with more standardized engineering components?  As I recall, the US did this spectacularly well once upon a time.   They can segment with real luxury brands as they once did, like Lincoln and Cadillac, and not trumped up high end basic vehicles with a few more standard options.

Ford had remarkable success with its Focus, but again they keep moving the average price higher and higher, treating each car line not as a strategic component but as an independent line competing on profit margin with each other.

So they tend to blur their marketing and attempt to optimize on profit margin on a vehicle line basis. And they continue to do some of the dumbest things in engineering their products, as if they have institutional amnesia with each model year. They repeat the same mistakes over and over, and manage for pennies while losing dollars.

This higher low end is the niche being targeted by Hyundai and some of the other newcomers, but their quality is lacking based on what I have seen. If the US firms keep trying to be all things to everyone, they may find themselves going down with the disappearing middle class.

But again, much of this is due to misalignments and distortions in government policy, rolling over for mercantilism.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds

A short squeeze has really not yet begun.

This is a 'convenient crisis' if they wish to allow the price of gold to rise gracefully without being too straightforward about the impending squeeze on physical supply which their monetary and official bullion policies are causing. It would tend to relieve some of the pressure if it is done judiciously.

However, I don't think it likely this will happen however, since this implies a certain self-awareness and humility that is uncharacteristic of the banking cartel.

To paraphrase Orwell, in a currency war, as in a war by other means, the first victim is the truth.

Third World America - The Big Fix: The Gulf Of Mexico Oil Spill Coverup

"Maintaining silence about a dirty truth is another way of lying, a common practice in high places."

Michael Parenti

As we approach the fourth anniversary of the Deepwater Horizon Gulf Oil Disaster, perhaps it is a good time to remember the great success it represents, the success in shifting the thoughts of attention deficient Americans from the things that really matter, like honest and accountable government.

Is anything really different, or have we just been prompted to move on and think about something else?  Will the US be better prepared to deal with the next financial or environmental crisis?

Are portions of the US any different from other third world countries that are sacked of their resources, their people impoverished, their quality of life ruined, and their children left with little or no hope for the future?

Hope and change.




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